Cryptocurrency update: Whales master the Bitcoin sea

Whales are causing a big splash in the world of Bitcoin, increasing their holdings, possibly turning a bearish market into a bullish one.

Cryptocurrency update

Whales increase their Bitcoin holdings

The number of BTC tokens held by whales has increased by 80,000 last week, according to Glassnode data.

Whales are clusters of IP addresses controlled by a single network participant holding a minimum of 1,000 BTC. As of Friday 2^nd July, whales controlled 4.2m Bitcoin tokens split between 1,922 entities.

Commentators say increased whale interest is good for the Bitcoin market, which has struggled throughout June. Whale numbers are at a current all-time high. It was these entities that helped power BTC from $10,000 at the start of the year to nearly $60,000 in February.

While the BTC market did break above $64,000 in April, this was mainly during a sell-off period for whales. Since then, BTC has struggled to break out of the $34,000 range. By early May, according to Glassnode, whales’ collective stash had fallen to 4.17m Bitcoin tokens.

If more large entities are picking up BTC tokens during its current market downturn, then this could help power prices upwards. Although if this is the case, then we may be looking at a similar cycle to what we saw earlier in the year: whales buy, price shoots up; whales sell, price declines.

What this does indicate is that small-scale investors do not have the muscle to course correct BTC. It appears only institutional-level investors, with institutional-level capital, are able to buy in bulk in order to trigger bull runs.

When the whales began to sell following April’s peak, for example, prices plummeted. At its lowest, BTC was trading for below $30,000 – something that hadn’t happened since 2020.

The market will be taking whales renewed interest as a sign the good times could be returning. It will be hoping the bottom has been reached. However, there are numerous factors had play outside of large-scale investors’ interest that can have a big effect on Bitcoin prices, both positively and negatively.

Bitcoin hash rate difficulty dramatically drops

The Bitcoin hash rate has recorded its highest ever drop in difficulty.

According to BTC.com, the difficulty rate has dropped 28% as China ramps up its crackdown on cryptocurrency mining operations.

The hash rate refers to the rate at which new Bitcoin tokens are generated when computational algorithms are solved on the BTC blockchain. Mining difficulty refers to the amount of power needed to validate Bitcoin transactions. The network adjusts difficulty levels every two weeks in response to competition amongst miners.

The drop in difficulty suggests a lower level of competition of miners using the Bitcoin network.

It’s thought the drop in difficulty rate added $1,000 to the BTC price in early hours trading on Monday 5^th June. Transaction fees on the blockchain network have also fallen.

China was responsible for 65% of the global Bitcoin hash rate. That has fallen away dramatically since the new outright ban on digital assets the Chinese government has imposed. Mining operators have either had to relocate or sell their mining rigs to foreign cryptocurrency farms.

A difficulty correction is due in another two weeks, by when we’ll get a clearer picture of how the Chinese mining ban has affected Bitcoin mining operations.

Ethereum reaches big Bitcoin-beating milestone

Ethereum is used to playing second fiddle to Bitcoin, but the world’s second-most popular cryptocurrency recently overtook its larger cousin in one key metric.

On July 3^rd, Ethereum registered the highest number of single-address users on its network at over 750,000 – 50,000 more than Bitcoin. This data comes from cryptocurrency analytics firm Santiment.

In fact, Bitcoin’s total number of single user addresses has dropped 38% over the past three months, reports Bitinfocharts.

What’s bearish for Bitcoin could prove bullish for Ethereum.

ETH is up 1000% year-on-year and has outperformed Bitcoin in terms of price action threefold in 2021. Long awaited upgrades to the Ethereum blockchain, increasing experimentation in decentralised finance (DeFi) by banks and institutions, plus the non-fungible token (NFT) craze have all lead to a spike in Ethereum network use.

Ethereum’s utility could make it the cryptocurrency of choice if the world moves towards decentralised finance models. To use the Ethereum blockchain network, users must pay transaction fees using ETH tokens. That gives it a more practical use of Bitcoin, whose massive price now all but precludes the token being used as a currency in everyday payments.

ETH prices may increase if its user base continues to expand.